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The recovery of Iraqi economic activity, will it repeat its role?
Economical 12/25/2023
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Yasser Al-Metwally
Most countries base their economic relations on international assessments of a specific country’s economy, aiming to deal with it based on the strength of its economy, according to current custom.
By tracking the assessments of the International Monetary Fund missions through its teams of experts, we conclude that the Iraqi economy has begun to recover despite the impact of the cuts imposed on its oil production on overall growth. The important result is that inflation rates have declined during this year.
Despite all the criticism directed at the approach to the tripartite budget (the framework of the effective three-year budget law) and with the possibility of significant risks to the sustainability of the country’s public financial conditions in the medium term, the structural reforms pursued by the government are extremely important factors in ensuring the protection and stability of the macroeconomic.
In light of this vision, expectations of achieving growth by 5 percent during the year 2023, which is about to end, have been achieved. It is true that implementing the budget will help to continue non-oil growth in the next year 2024. However, the decline in oil production after the closure of the oil pipeline linking Iraq and Turkey, and reducing Production at the request of the OPEC+ group will work together to reduce gross domestic product growth in the years 2023 and 2024. The inflation rate has declined from its peak of 7 percent this year, and the most important thing is that it is expected to remain stable at this rate during the coming months. Perhaps the reason for the reduction in inflation rates is due to the Central Bank of Iraq adopting a more stringent monetary policy, the impact of raising the exchange rate of the Iraqi dinar, the decline in global food prices, and the return of trade financing operations to normal with improved compliance with the anti-money laundering and counter-terrorism financing framework.
It is useful to point out that adopting the three-year budget setting method may lead to improving the level of financial planning and the continuity of implementation of development projects in the medium term. Which is the most important thing.
However, the government faces another challenge, as the delay in starting to implement the budget this year may contribute to the shift from a large surplus achieved in 2022 to a larger deficit in 2024, reflecting the full annual impact of budget procedures.
Such a major expansion in public finances, including a fundamental increase in the numbers of public sector members and pensioners, will raise public spending rates, which will put pressure on funds.
In this case, the government must ensure the protection of extremely important needs, and this is done by examining more non-oil revenues. The government did well by paying attention to addressing this aspect by supporting these measures by moving to work on a more targeted social safety net, and working to provide better protection for groups. Fragile.
Hence, the most important role of the private sector is highlighted in achieving balance in reducing pressure on the government by stimulating economic diversification and creating job opportunities led by the private sector, which is a pivotal factor in achieving growth. This trend is credited to the government if support for the private sector continues to ensure the creation of equal opportunities for the private sector through reforms. In banking and the electricity sector, reducing distortions in the labor market, and continuing to make efforts to strengthen governance and limit the spread of corruption.
This evaluation of governance performance by international experts will require them to advance the reality of the Iraqi economy and sustain this recovery, so that Iraq can regain its pivotal role among emerging economies.
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